2nd Quarter 2013 Benefits Corner

Health Care Reform: changes coming

Changes To Take Place Under Health Care Acts

As we are aware, there has and continues to be controversy surrounding the Health Care Reform Act (HCRA) and related changes that are to take place under the Patient Protection and Affordable Care Act. Now that the delayed effective dates for different provisions of the Acts are drawing near, there is heightened concern about the effect of the laws.

In 2014 more individuals, who otherwise were not able acquire health insurance, will be able to purchase coverage through Insurance Exchanges known as Health Insurance Marketplaces (HIM). We also will see a strengthening of the Independent Payment Advisory Board (IPAB).

The HIM’s are being introduced to make medical coverage available to more individuals at affordable prices. While all insurance carriers will no longer be able to preclude individuals from acquiring coverage because of pre-existing medical conditions, the HIM’s should be able to make available comparable coverage at lower prices. Over time it is the hope the exchanges will create enough competition for insurance carriers so they will reduce their insurance premiums. The overall aim of the HCRA is to reduce costs and improve the quality of medical care.

The IPAB’s Significant Role

The IPAB, which some people refer to as the “death panel”, is charged with tackling Medicare fraud, excessive payments for prescriptions drugs and looking for ways of providing better care at lower costs. The board does not have the authority to act on its own. Instead, it is required to recommend changes in policy to Congress if projected Medicare spending will exceed targeted growth rates.

By law, it is prohibited from recommending any policies that will ration care, raise taxes, increase premiums or cost-sharing, restrict benefits or modify who is eligible for Medicare. The board will consist of 15 experts, including doctors and patient advocates who will be nominated by the President and confirmed by the Senate. In addition to these changes, other endeavors are afoot which are aimed at improving the quality of medical care while reducing medical costs.

A new payment procedure for doctors

Among the new undertakings is the introduction of a pay for performance program in the public hospital system for the City of New York. Instead of receiving automatic pay increases, doctors will receive annual bonuses based on how well they reduce costs, increase patient satisfaction and improve the quality of medical care.

In three major hospitals that employ 3,300 doctors, their bonuses will be based on meeting such performance goals as improving the coordination of patient care and reducing the average length of stay in the hospital. It is the aim of the City to measure a doctor’s performance against national standards.

The use of bonuses to motivate doctors to change their behavior is admirable. However, it's been my experience that bonus programs work well only if they have goals that are clear, measurable, achievable, understood and the potential bonus recipients are committed to them. Further, the bonuses should be meaningful and the potential recipients should have full control of the actions that affect their bonuses.

If they do not have complete control, then anyone who can affect the outcome should also be included in the bonus program. Likewise, they should have a set of achievable goals. For support staff, a team bonus would probably make sense. Based on the situation the team bonus could then be allocated to members based on their individual performance. As you can see, using bonuses to alter behavior can be a powerful tool. But the devil is in the details.

Preventative Care is the key to reducing costs

While it is important for healthcare professionals to modify their behavior, I believe the key to reducing costs lies in preventative care. Along these lines, an increasing number of Americans already are using smart phones and other devices to collect and track their personal health data. Currently, there are more than 500 companies that are making or developing self-management tools. And there are nearly 13,000 health and fitness applications available in the marketplace.

Dr. Peter Margolis, a professor of pediatrics at the Cincinnati Children’s Hospital, is testing new software that tracks a patient’s behavior pattern. He is using the software to track 20 young patients who have Crohn’s disease. The doctor and parents watch the tracking charts for early signs of flare-up symptoms. The physician can then use the feedback to adjust the treatment to minimize the effects of a flare-up.

As you can see, using tracking software in the monitoring and treatment of chronic ailments like diabetes can be extremely helpful. I would think that, with proper training and oversight by a physician’s staff, the number of unscheduled office visits and costly emergency room visits could be significantly reduced. However, it’s also important that the cost of tracking and monitoring be covered by medical plans. This probably means that the definition of a covered medical expense would have to be modified. This change could help make an impact in reducing medical costs.

Electronic Recordkeeping: It's here to stay

Whenever electronic medical data is discussed, some individuals immediately get concerned about identity theft. However, we should get comfortable with electronic recordkeeping because it is here to stay. As part of the HCRA, medical providers are being encouraged to switch to electronic medical records since it is a way of improving the accuracy of medical data while also reducing costs.

The Texas Health Resources, which annually cares for 140,000 in-patients and 1 million out-patients, has electronically integrated its medical files to reduce duplicate records, improve patient registration and, most importantly, prevent medical errors. To protect a patient’s identity they have employed high-tech scanners to map and read the veins in the palm of a patient’s hand. The image is reportedly 100 times more accurate than fingerprints. Palm vein patterns do not change in adults. Children need to be rescanned annually until age 15 because their hands continue to grow.

Out-of-country Medical Care

You may recall that in a previous Encore article I wrote about individuals traveling to India, Thailand and Singapore for medical treatment. This is being promoted by some organizations as a way of obtaining quality medical care at significantly reduced prices.

Mexico offers quality medical care at lower prices than Asia

As an alternative, Mexico is now being promoted as a way of obtaining quality medical care at lower prices without having to travel to Asia. Hospitals on Mexico’s Pacific Coast are being targeted as low cost alternatives to soaring medical costs in the U.S. for everything from knee replacement to heart surgery. While this could be a game changer for Mexico and the United States, Mexico would have to first improve their security and would also need to have their hospitals certified to treat international patients.

Additionally, for Mexico to become a major factor, U.S. medical insurance -- including Medicare -- would have to be modified. Presently, Medicare does not cover expenses incurred outside the U.S. Also, private insurers generally only cover expenses incurred outside the U.S. for medical emergencies.

There is probably a greater chance that U.S. insurers would amend their contracts to cover these expenses before Medicare recognizes them. Congress would have to approve such a change to Medicare. While this is an intriguing idea, it probably will never come to pass.

Finally, I would like to mention that, if you have Chevron medical coverage, you should have received a W-2 form from Wells Fargo Bank, which is the agent for Chevron. In box 12 of the form there should appear the code “DD” and a dollar amount. That dollar amount represents the annualized total cost of your Chevron coverage, i.e. the sum of your contributions plus the Company’s contributions.

As part of HCRA, employers are required to provide this information. This is NOT taxable income but merely a way for the government to determine what is being spent on medical coverage. However, it is my understanding that sometime in the future we may see costly medical plans being taxed.

Chevron continues to actively review the impact of this and all of the regulations related to HCRA.

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